Saturday, February 10, 2007 at 03:53PM
Lereah says "Bottom".
Received today by email:
Saturday, February 10, 2007
REAL ESTATE ROUNDUP
by JOHN LUNDIN
John Lundin & Associates
Real Estate Slump May Have Bottomed Out
The final housing numbers for 2006 are in, and they confirm what anyone who bought or sold a home last year has suspected: It was the worst housing slump in nearly two decades, both locally and nationally.
The freshest numbers also provided tea leaves for the more pressing question: has the housing market bottomed out yet — or will prices slide further before the market recovers?
After an historic five-year boom propelled by a strong economy and low interest rate, the real estate market went bust in 2006, according to the final tally released by the National Association of Realtors. Nationally sales of existing single-family homes fell 8.4 percent to about 6.5 million, the biggest annual decline since a 14.8 percent drop in 1989.
Like everything in real estate, a lot depended on location, location, location. The West — which had seen outsized gains during the boom — was hit hardest by the slump, with sales off nearly 16 percent last year. Sales in the South were down 7 percent, while the Midwest and Northeast saw sales fall nearly 6 percent for the year.
Double-digit price gains that sparked a frenzy of condo flipping and speculative building also came to an abrupt halt last year. The median price of an existing home rose just 1.1 percent last year — less than inflation — compared with 12.4 percent in 2005.
Those numbers have driven away much of the quick-buck crowd that loaded up on unbuilt condos and helped fuel the rapid rise in prices. In 2005, some 40 percent of the market represented investment or second-home purchases. Comparable figures for 2006 were not yet available, but the departure of those investors should help stabilize the market, according to David Lereah, chief economist at the National Association of Realtors.
“With fingers and toes crossed, it appears that we have hit bottom in the existing-home market,” he said.
The trade group's official forecast calls for a 1.2 percent drop in sales of existing homes this year and a 1.5 percent increase in the median price.
Some market watchers note that at 6.5 million sales a year the pace of homes sales is still strong by pre-boom standards. And there are signs that the slump is easing, if not reversing course. Brian Westbury, chief economist at First Trust Advisors, notes that lumber prices, mortgage activity and some homebuilder stocks have begun to pick up.
“It looks to me as though maybe we haven't reached the complete bottom yet, but we're in the bottoming phase right now,” Westbury says.
The good news is that — unlike some past housing slumps — this one doesn’t look like it’s going to drag the overall economy down with it. Unemployment remains low, consumers seem to be weathering the housing downturn reasonably well, and interest rates are still in check.
In North San Diego County , signs of increasing activity abound. Area Realtors report more buyers are actively looking at homes once again, and more homes have gone into escrow over the past few weeks than during any period since August of last year.
Buyers are still finding an abundance of homes for sale, often at reduced prices. Mortgage financing remains readily available at interest rates that are still near record lows.
This first quarter of the year could be a turning point in the North County real estate market, and it is certainly an attractive time for buyers to be buying.
John Lundin is a San Marcos REALTOR ® and the broker/owner of John Lundin & Associates.
Jim the Realtor
20 Comments
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Response: Colomarine 81 postall about Colomarine and top news
Reader Comments (20)
I like the way they are now blaming the boom on the 40% of investor buyers. I think this is the first article by a Realtor that even admits that. NAR always maintained that prices were not rising do to investors, I guess they finally figured out what many of us have known for years. They will be reporting the 30-40% price declines in California in 2010……….
Here's the number of sales and median prices according to the MLS:
2002 80 sales/ $627k median
2003 86 sales/ $702k median
2004 80 sales/ $952k median
2005 67 sales/ $965k median
2006 34 sales/ $975k median
I know a lot of families that moved from here to La Costa Oaks in 2005 and 2006 so I was shocked that the median wasn't down in 2006 by about 10% with sales drying up so drastically all those vacant listngs. Maybe the decrease will happen this year, but I saw two overpriced homes here just go into escrow in less than a month on the market.
First off let me say that I don’t know anything about that neighborhood except that it was built on some really good dirt biking terrain. My buddies and I used to ride there almost every day after school. I have driven through the area once since it was built.
The one thing you will learn if you read this site for any length of time is that Median price is useless. I did a quick check on Zillow of that area, on the 4 recent sold homes I randomly picked, 3 of the 4 sold for less then they paid:
1. 8/03 769K, 12/06 735K
2. 6/04 1.11M, 2/06 1.1M(only lost 10K)
3. 1/04 800K, 12/06 905K
4. 3/05 1.075M; 8/06 1.037M.
The most interesting thing I see is that the longest any of these properties was held was just 3 yrs. Looks to me like their mortgages started to adjust and they got out, why else would 3 of them sell for a loss? Another reason the Median probably went up last year is the higher priced homes got in deeper trouble with the mortgage adjustments. There original payment would have been higher thus the adjustment would be a large total amount. I did not see many of the lower priced properties in that area sold recently, so that is why I am making that statement.
Maybe the random 4 I picked contained the only 3 properties that lost money, but I doubt it.
I highly doubt people moved because their rates adjusted. You could get another 5 year adjustable for about the same payment. Heck you could a get a nagative am loan and save money on a monthly basis.
More likely they were transfered or divorced. I know of 2 friends that were transferred and their companies ended up being the ones taking the loss. One sold at a loss of about $300,000 in 2006 and the loss was picked up by the company to make the seller whole. That house ended up reselling about 2 months later for about $130,000 more than what the "flipper" paid. From what I was told the "flipper" buys the house at a discount and then markets it and pays the company a percentage. Who knows? Deals like those actually hurt the medians and comps, but LCV seems to be holdng up pretty well. At some point last year there were about 30 homes for sale and only 1 or 2 pending. There are currently 13 for sale and 6 pending so it appears to be pretty healthy.
Most people in my neighborhood go to the beach or shuttle kids to their activities or get together with neighbors and friends on the weekends. I live on a cul de sac and we have quite a diverse bunch of folks. One family from Europe, one from India, another from Taiwan. All were drawn to the neighborhood for the excellent schools and family friendly environment.
Based on your post you sound very "classy".
If you go with statistics, my random sample looks about right for the ARM loan case. 60-80% of all home loans in our area over the past few years have been ARM’s, so the 3 out of 4 probably did have that type loan.
I sold #4 on your list. It was a divorce.
La Costa Valley benefits from being the right age. It was built from 1999 to 2002, when the houses were a little smaller and a lot less expensive. In the beginning they were selling in the $300,000s.
I think a lot of early buyers liked it enough that it didn't make sense to move 2-4 years later. Not only did prices go up, but so did the square footage and the mello-roos. Homeowners who wanted to move up, found instead that they were too comfortable, and didn't move.
It may look a little 'Stepford', but you could do a lot worse.
That's my theory, I'll see if I can back it up with some evidence.
I am catching up on some reading and came across the below information. Did you get this report from your Association?
The North County Times. “In its monthly HomeDex report Friday, the North San Diego County Association of Realtors reported that the amount paid for single-family homes dropped 12.3 percent from a year ago, reflecting the 6.7 percent drop in the number of homes sold."
It's not on their www.nsdcar.com website either - I'm going to call them tomorrow and ask how to use that valuable information they are providing (or hiding).
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KAA,
Are you saying that people moved from La Costa Valley to La Costa Oaks???? Why in the world would they do that? (similar neighborhoods, but it would be more expensive with the higher taxes, etc.) I don't understand why they would do that.
By my count there have been 25 resales in LCV since last June. 4 have sold for less than the previous purchaseprice. 1 was a divorce (as per Jim), 2 were relocations where a relocation service bought the house and resold it, and the other one I wasn't familiar with. It was a smaller house and it looked like the buyer just overpaid for it and had to sell for some reason. The gains were all over the board including one that was resold for $350,000 more than the 2004 purchase price.
Anyone know what happened to John Lundin? He used to own San Marcos listings, especially 92069, but his websites seem to be gone, and I haven't seen any signs in the neighborhood, where in the past you couldn't drive a block without seeing one.